by Coinstrooper Crypto Articles
Quick Take
  • Wood expects the Federal Reserve to end quantitative tightening at its December 10 meeting, immediately easing one pressure point.
  • The government shutdown that caused the Treasury General Account cash buildup has concluded, returning funds to circulation.
  • “We think that source of a liquidity squeeze is behind us,” Wood stated during the webinar.
  • Interest rates remain the third constraint, but Wood anticipates another December cut as economic data weakens.

What Happened

ARK Invest CEO Cathie Wood forecasts the liquidity squeeze hitting crypto and AI markets will reverse within weeks, driven by three Federal Reserve policy shifts expected before year-end.

Average spot ETF investors are now underwater, with a flow-weighted cost basis of around $89,600.

ARK Invest responded by accelerating purchases across crypto-linked equities, adding $42 million in Bullish, Circle Internet Group, and BitMine Immersion Technologies on November 20 alone.

Wood firmly rejected suggestions that artificial intelligence investments have entered bubble territory, contrasting current conditions with the tech and telecom bubble two decades ago.

Market Context

Speaking during ARK’s November market webinar, she identified three temporary liquidity constraints she expects to ease rapidly through Federal Reserve action and reopened government spending.

“We think that source of a liquidity squeeze is behind us,” Wood stated during the webinar.

Oil prices breaking below $60 per barrel for West Texas Intermediate adds deflationary pressure. New home prices have declined for about 1 year, while existing home price inflation has dropped to 1.5%.

Crypto Markets Lead Liquidity Downturn as ARK Buys Aggressively

Crypto markets demonstrated their sensitivity to liquidity conditions throughout November, with Bitcoin plunging below $90,000 for the first time since April.

Wood emphasized crypto’s role as a liquidity barometer during the webinar. “It is interesting watching the crypto ecosystem really be a leading indicator when liquidity is ebbing and flowing,” she noted.

Why It Matters

Wood expects the Federal Reserve to end quantitative tightening at its December 10 meeting, immediately easing one pressure point.

Ten-year Treasury yield inflation expectations fell to approximately 2.5% over recent months, while Trueflation’s real-time monitoring shows similar levels.

Details

Her firm continues aggressively buying crypto equities during the downturn, deploying over $93 million in a single day this week across beaten-down digital asset stocks.

Wood’s prediction comes as Bitcoin trades below $88,000 after falling from its October peak of $126,000, while crypto-linked equities are facing their sharpest monthly declines since early 2024.

December Relief: Fed Policy and Inflation Data

The government shutdown that caused the Treasury General Account cash buildup has concluded, returning funds to circulation.

Interest rates remain the third constraint, but Wood anticipates another December cut as economic data weakens.

“We think we will get another cut in December, and that the Fed will shift from what seems to be a hawkish tone right now back into a more dovish tone as we approach that date,” she explained.

“We would not be surprised to see a real break in inflation once the tariffs have passed through in the next year,” Wood predicted.

The 30% drawdown from October’s $125,100 record triggered $254 million in single-day outflows from US Bitcoin funds on November 17.

The firm’s combined crypto exposure through its flagship ETFs surpassed $2.15 billion as of early November, spanning Coinbase, Robinhood, Circle, and Bullish holdings.

ARK maintains its highest crypto allocation in ARKF at 29%, followed by ARKW at 25.7% and ARKK at 17.7%.

Wood’s dip-buying strategy extends her conviction that “the restructuring of the financial ecosystem is also in the first inning.“

AI Bubble Concerns Dismissed